Australian Employment Edges Higher Even as Full-Time Jobs Slump

(Bloomberg) -- Australian employment edged higher in the first month of the year, despite a plunge in full-time jobs, suggesting the central bank is likely to keep interest rates on hold.

Key Details

• Jobs rose 16,000 from December; economists forecast 15,000 gain 
• Unemployment rate fell to 5.5% from revised 5.6%; estimate 5.5%
• Full-time jobs dropped 49,800, the first decline since September; part-time employment advanced 65,900
• Participation rate fell to 65.6%, matching economists’ forecasts 
• The Aussie dollar edged lower after the report before recovering to be little changed at 79.32 U.S. cents at 12:21 p.m. in Sydney

Big Picture

The report suggests the labor market has taken a slight breather after last year’s employment bonanza in which the economy added 400,000 jobs, three-quarters of them full-time. Some slack remains in the market, and combined with businesses reluctant to increase costs, wage growth has remained weak and inflation tepid. That’s prompted the central bank to signal rates will stay at a record-low 1.5 percent until the jobless rate is closer to its 5 percent full-employment estimate.

Economist Takeaways

• “Jobs growth should pick-up in the next couple of months -- the jobs vacancies survey highlights that firms are still looking to hire,” said Sarah Hunter of BIS Oxford Economics. “But the labor market can comfortably meet this demand through rising participation and the elimination of underemployment. This means wages growth will be subdued for at least the rest of this year.”
• “While the continued strength of the labor market will support consumption growth this year, without much more wage inflation the RBA isn’t going to raise interest rates,” said Paul Dales of Capital Economics.
• “There is still ample spare capacity,” said Craig James at Commonwealth Bank of Australia’s securities unit. “Existing workers would like to work longer hours as well. So wages will only lift gradually from historically-low annual growth rates near 2 percent. And as we’ve seen in other countries, unemployment can fall below perceived levels of ‘full employment’ without sparking higher wage growth.”

Other Details

• Job gains were led by Queensland, adding 19,700 positions, and South Australia, with 5,300 new hires. New South Wales, the nation’s most populous state that’s boomed under low interest rates, led the losses with 21,200; the mining hub of Western Australia also shed 8,900 positions
• Unemployment in New South Wales climbed to 5.1 percent from 4.8 percent; Victoria, also a center of recent expansion, saw its jobless rate fall to 5.6 percent from 6.1 percent. The island state of Tasmania dropped to 5.3 percent from 6.1 percent, the biggest decline

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net.

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Victoria Batchelor

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